Want to Invest in Bitcoin but Don’t Know How? We’ve Got You Covered
After a record-breaking year, the value of Bitcoin has surged to over $60,000. With yesterday’s initial public offering of Coinbase valued at $86 billion, Coinbase CEO Brian Armstrong dubbed it “a landmark moment for the crypto space.”
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For those who weren’t so quick on the buck to get in early, cryptocurrencies now seem like an investment that will be impossible to ignore.
Crypto is a new concept, let alone investment, that is incendiary at best. Some supporters and early investors have an almost religious allegiance to its progression, while others, from the likes of Janet Yellen to Warren Buffett, have cautioned against jumping in with both feet.
A lot is happening, and very quickly, in the crypto world — so how does the average investor fit in?
First things first. Crypto is a new and relatively volatile asset. Currency volatility means prices fluctuate up or down quickly relative to other currencies. Volatility does not always imply risk, but volatility is still volatility, and you must have the right stomach for large price swings.
For example, if you invested in Binance Coin yesterday, you would have seen a roughly 12% increase in your investment. However, its volatility is 9%, according to CryptoVolatility, a site that tracks crypto prices and volatility. To put it into perspective, the world’s top five currencies tend to hover around less than 1% volatility. If you were in Universe, another crypto coin, you would’ve jumped 1.75% withstanding a whopping 60% volatility.
So the first step is accepting that this asset will not perform like other currencies or assets in your portfolio and assessing what kind of volatility you are comfortable with. Once you have a good idea of how much volatility you are willing to accept, follow these basic starting points to slowly start adding crypto into your portfolio.
1. Open an account from a platform like Coinbase to put your bitcoins into. You’ll need to share personal information to open an account, just like you would provide to a bank or investment manager.
2. Deposit money from your bank account or cash app into your new account.
3. Once you’ve funded your account, buy and trade the coins of your choice like you would any other asset in your portfolio.
From there, the rest is up to you. There are thousands of strategies, but a good place to start might be “copy-trading” platforms. Copy-trading platforms are platforms that companies build to mimic the trades of more experienced traders, Forbes reports. This can allow newbie traders room to learn while still having full control over their accounts. Shrimpy, eTtoro and Zignaly are some that offer the service.
If you’re not ready to buy Bitcoin itself just yet, exchange-traded funds and index funds are great alternatives for easing into the crypto world. Bitcoin ETFs mimic digital currency prices and eliminate the need for crypto account wallets. You simply buy into the ETF and have exposure to the market, but your personal information is given to the fund you’re investing in, not the crypto platform account. Also, there are fund managers managing these accounts, whereas with a trading platform, you do the trading yourself. You can find ETFs through traditional and online investment brokerages as well as trading apps.
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You can even start putting crypto assets into your retirement accounts. Platforms like iTrustCapital allow investors to add Bitcoin to a qualifying IRA — or even a 401(k), if the plan allows it — for a small fee.
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